Five9 Reports Third Quarter Total Revenue Growth of 27%

SAN RAMON, CALIF. - November 1, 2016 - Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud software for the enterprise contact center market, today reported results for the third quarter 2016 ended September 30, 2016.

Third Quarter 2016 Financial Results

Total revenue for the third quarter of 2016 increased 27% to a record $41.0 million, compared to $32.3 million for the third quarter of 2015

GAAP gross margin was 56.6% for the third quarter of 2016, compared to 54.1% for the third quarter of 2015

Adjusted gross margin was 61.5% for the third quarter of 2016, compared to 59.4% for the third quarter of 2015

GAAP net loss for the third quarter of 2016 was $(3.9) million, or $(0.07) per share, compared to a GAAP net loss of $(6.0) million, or $(0.12) per share, for the third quarter of 2015

Non-GAAP net loss for the third quarter of 2016 was $(0.2) million, or $(0.00) per share, compared to a non-GAAP net loss of $(3.9) million, or $(0.08) per share, for the third quarter of 2015

GAAP operating cash flow for the third quarter of 2016 was $1.7 million, compared to a GAAP operating cash outflow of $(3.2) million for the third quarter of 2015

Adjusted EBITDA for the third quarter of 2016 was $2.7 million, or 6.7% of revenue, compared to a loss of $(1.1) million, or (3.4)% of revenue, for the third quarter of 2015

“Our third quarter results were once again outstanding. Our revenue grew 27% year-over-year resulting in record revenue of $41.0 million. This revenue growth was driven primarily by the continued acceleration in our enterprise business, which delivered 43% growth in LTM enterprise subscription revenue and which drives high marginal profitability. Additionally, Five9 was once again named a leader in this year’s Gartner Magic Quadrant for Contact Center as a Service, North America, published on October 24th, and we were positioned highest on ability to execute. We see this as further validation of our leadership position in the enterprise market. We believe we are still in the early days of a massive push towards modernization of customer service and contact center technologies. Given our leadership position in this market and the strong momentum in our business, we are again raising 2016 guidance.”

- Mike Burkland, President and CEO, Five9

Q3 Business Highlights

Third quarter record for enterprise bookings

LTM enterprise subscription revenue grew 43% year-over-year, up from 35% in the year ago period

LTM enterprise revenue increased to 68% of total revenue, up from 63% in the year ago period

Annual dollar-based retention rate was 100%, up from 95% in the year ago period

Business Outlook

For the full year 2016, Five9 expects to report:

Revenue in the range of $159.2 to $160.2 million, up from the prior guidance range of $155.8 to $157.8 million that was previously provided on August 3, 2016

GAAP net loss in the range of $(15.8) to $(16.8) million, including a $1.0 million write-off of unamortized fees and discounts as well as a prepayment penalty from the termination of our prior term debt facility, or a loss of $(0.30) to $(0.32) per share, improved from the prior guidance range of $(17.8) to $(19.8) million, or a loss of $(0.34) to $(0.38) per share, that was previously provided on August 3, 2016

Non-GAAP net loss in the range of $(4.5) to $(5.5) million, or $(0.09) to $(0.11) per share, improved from the prior guidance range of $(6.5) to $(8.5) million, or $(0.12) to $(0.16) per share, that was previously provided on August 3, 2016

For the fourth quarter of 2016, Five9 expects to report:

Revenue in the range of $41.3 to $42.3 million

GAAP net loss in the range of $(3.5) to $(4.5) million, or a loss of $(0.07) to $(0.09) per share

Non-GAAP net loss in the range of $(0.8) to $(1.8) million, or a loss of $(0.02) to $(0.03) per share

Conference Call Details

Five9 will discuss its third quarter 2016 results today, November 1, 2016, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 2120093), please dial: 888-437-9362 or 719-325-2492. An audio replay of the call will be available through November 15, 2016 by dialing 888-203-1112 or 719-457-0820 and entering access code 2120093. A copy of this press release will be furnished to the Securities and Exchange Commission on a Current Report on Form 8-K, and will be posted to our web site, prior to the conference call.

A webcast of the call will be available on the Investor Relations section of the Company’s website at http://investors.five9.com/.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures. We calculate adjusted gross profit by adding back the following items to gross profit: depreciation, amortization, and stock-based compensation expenses. We calculate adjusted EBITDA by adding back the following items to net loss: depreciation, amortization, interest expense, income tax expense, stock-based compensation expense, and interest and other, which consists primarily of interest income and foreign exchange gains and losses. We calculate non-GAAP operating income (loss) as operating loss excluding stock-based compensation, amortization of acquisition intangibles and an immaterial one time out of period adjustment for sales taxes. We calculate non-GAAP net loss as net loss excluding stock-based compensation, amortization of acquisition intangibles, extinguishment of debt, amortization of debt discount and issuance costs, and an immaterial one time out of period adjustment for sales taxes. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. Five9 considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the Company, exclusive of unusual events, as well as factors that do not directly affect what we consider to be our core operating performance. The Company’s management uses these measures to (i) illustrate underlying trends in the Company’s business that could otherwise be masked by the effect of income or expenses that are excluded from non-GAAP measures, and (ii) establish budgets and operational goals for managing the Company’s business and evaluating its performance. In addition, investors often use similar measures to evaluate the operating performance of a company. Non-GAAP financial measures are presented only as supplemental information for purposes of understanding the Company's operating results. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. Please see the reconciliation of non-GAAP financial measures set forth herein and attached to this release.

Forward Looking Statements

This news release contains certain forward-looking statements, including the statements in the quote from our Chief Executive Officer, including statements regarding Five9’s market position, customer service and contact center market trends, increasing demand for Five9’s solutions, and the fourth quarter 2016 and full year 2016 financial projections set forth under the caption “Business Outlook,” that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate. Risks that may cause these forward-looking statements to be inaccurate include, among others: (i) our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock; (ii) we may be unable to attract new clients or sell additional services and functionality to our existing clients or could experience a reduction in seats or revenues from existing clients; (iii) our recent rapid growth may not be indicative of our future growth and we may fail to manage our growth effectively; (iv) we may not be able to grow our sales and support staff sufficiently to continue to grow our business; (v) the markets in which we participate are highly competitive and we may be unable to compete effectively; (vi) we may be unable to manage our technical operations infrastructure, which could cause our existing clients to experience service outages, cause our new clients to experience delays in the deployment of our solution and subject us to, among other things, claims for credits or damages; (vii) a decline in our dollar-based retention rate could cause our revenues and gross margins to decrease and our net loss to increase and we may be required to spend more money to grow our client base to maintain our revenues; (viii) sales of our solutions to larger organizations may require longer sales and implementation cycles and we may be unable to offer the configuration and integration services or customized features and functions required by larger organizations, which could delay or prevent sales of our solution to them; (ix) downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern; (x) third-party telecommunications and internet service providers on which we rely may fail to provide our clients and their customers with reliable telecommunication services and connectivity to our cloud contact center software; (xi) we may be unable to achieve or sustain profitability; (xii) we may be unable to secure additional financing on favorable terms, or at all, to meet our future capital needs; and (xiii) the other risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our most recent quarterly report on Form 10-Q. Such forward looking statements speak only as of the date hereof and readers should not unduly rely on such statements. We undertake no obligation to update the information contained in this press release, including in any forward-looking statements.

About Five9

Five9 is a leading provider of cloud software for the enterprise contact center market, bringing the power of the cloud to thousands of customers and facilitating over three billion customer interactions annually. Since 2001, Five9 has led the cloud revolution in contact centers, helping organizations transition from legacy premise-based solutions to the cloud. Five9 provides businesses with cloud contact center software that it reliable, secure, compliant and scalable which is designed to create exceptional customer experiences, increase agent productivity and deliver tangible business results. For more information visit www.five9.com.